Untitled Flashcard Set
Session 06 — Must-Know Definitions
Supply Management — Broad set of activities used to analyze sourcing opportunities, develop sourcing strategies, select suppliers, procure goods/services, and manage suppliers. Session 06 Supply Management Pa…
Cost of Goods Sold (COGS) — The purchased cost of goods from outside suppliers.
Profit Margin — The ratio of earnings/profit to sales revenue.
Profit Leverage Effect — Decreasing purchasing costs increases profit faster than increasing revenue through sales. Every $1 saved in purchasing adds $1 to profit. Session 06 Supply Management Pa…
Strategic Sourcing — Identifying ways to improve long-term business performance by understanding sourcing needs, developing sourcing strategies, selecting suppliers, and managing the supply base. Session 06 Supply Management Pa…
Spend Analysis — Using purchasing data to understand spending patterns and identify opportunities for improvement.
Pareto Chart — A chart that orders categories of numerical data from highest to lowest so the most important categories are easy to recognize. Session 06 Supply Management Pa…
Category Profile — An internal analysis used to understand all aspects of a sourcing category that could affect the sourcing strategy.
Industry Analysis — An external analysis of major forces and trends affecting an industry, such as pricing, competition, regulations, technology, and supply/demand. Session 06 Supply Management Pa…
Make-or-Buy Decision — Strategic decision about which products/services will be provided internally and which will be provided by outside supply-chain partners.
Insourcing — Using resources within the company to provide products or services.
Outsourcing — Using outside supply-chain partners to provide products or services.
Offshoring — Locating an insourced or outsourced operation in a foreign country.
Nearshoring — Offshoring to an adjacent or neighboring country.
Onshoring — Locating an insourced or outsourced operation in the company's own country. Session 06 Supply Management Pa…
Total Cost Analysis — Identifying and quantifying all major costs associated with different sourcing options.
Direct Costs — Costs tied directly to the level of operations or supply-chain activity.
Incremental Direct Costs — Costs incurred only after a certain amount of production/activity occurs.
One-Time Costs — Costs incurred only when a product or service is first produced.
Indirect Costs — Costs not directly tied to the level of operations or supply-chain activity. Session 06 Supply Management Pa…
Kraljic's Portfolio Analysis — A method used to develop a sourcing strategy based on the value of a purchase and its supply risk/complexity.
Routine Quadrant — Low-cost/value products with low supply risk that are readily available.
Leverage Quadrant — High-spend products that are standardized and readily available from many suppliers.
Bottleneck Quadrant — Low-cost/value products with high supply risk because only a few suppliers can provide them.
Critical / Strategic Quadrant — High-cost/value products with high risk and a limited number of qualified suppliers. Session 06 Supply Management Pa…
Single Sourcing — Depending on one supplier for all or nearly all of a particular item/service.
Multiple Sourcing — Sharing purchases of an item/service across multiple suppliers.
Cross Sourcing — Using one supplier for one item and another capable supplier for a different item, so they can potentially back each other up.
Dual Sourcing — Multiple sourcing using only two suppliers.